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LIMITED LIABILITY COMPANY AGREEMENT
OF
OB RENTON PROPERTIES, LLC
(a Washington Limited Liability Company)
Date and Effective
as of
November 11,2011
LIMITED LIABILITY COMPANY AGREEMENT
OF
OB RENTON PROPERTIES, LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement”) is made
and entered into effective as of November 11, 2011, by and among the Persons whose signatures
appear on the signature page hereof.
ARTICLE 1 - DEFINITIONS
The following terms used in this Agreement shall have the following meanings (unless
otherwise expressly provided herein):
Act" means the Washington Limited Liability Company Act.
"Affiliate" means, with respect to any Person, (i) any other Person directly or indirectly
controlling, controlled by, or under common control with such Person, (ii) any Person owning or
controlling fifty-one percent (51%) or more of the outstanding voting interests of such Person,
(iii) any officer, director, or general partner of such Person, or (iv) any Person who is an officer,
director, general partner, trustee, or holder of fifty-one percent (51%) or more of the voting
interests of any Person described in clauses (i) through (iii). For purposes of this definition, the
term "controls," "is controlled by," or "is under common control with" shall mean the possession,
direct or indirect, of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or otherwise.
"Capital Account" means the capital account determined and maintained for each Unit
Holder pursuant to Section 8.3.
"Capital Contribution" means any contribution to the capital of the Company in cash or
property by a Member whenever made.
"Certificate of Formation" means the certificate of information pursuant to which the
Company was formed, as originally filed with the office of the Secretary of State on March 25,
2003, and as amended from time to time.
"Code" means the Internal Revenue Code of 1986, as amended, or corresponding
provisions of subsequent superseding federal revenue laws.
Company" means "OB Renton Properties, LLC1
"Company Minimum Gain" has the same meaning as the term "partnership minimum
gain" in Regulation Sections 1.704-2(b)(2) and 1.704-2(d).
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"Deficit Capital Account11 means with respect to any Unit Holder, the deficit balance, if
any, in such Unit Holder's Capital Account as of the end of the taxable year, after giving effect to
the following adjustments:
(i) credit to such Capital Account any amount that such Unit Holder is
obligated to restore to the Company under Regulation Section 1.704-l(b)(2)(ii)(c), as well as any
addition thereto pursuant to the next to last sentences of Regulation Sections 1.7042(g)(1) and
(i)(5); and
(ii) debit to such Capital Account the items described in Regulation Sections
1.704-l(b)(2)(ii)(d)(4), (5) and (6).
This definition of is intended to comply with the provisions of Regulation
Sections 1.704-l(b)(2)(ii)(d) and 1.704-2, and will be interpreted consistently with those
provisions.
"Distributable Cash" means all cash received by the Company, less the sum of the
following to the extent paid or set aside by the Company: (i) all principal and interest payments
on indebtedness of the Company and other sums paid or payable to lenders; (ii) all cash
expenditures incurred incident to the normal operation of the Company's business; and (iii)
Reserves.
"Economic Interest" means a Unit Holder's share of Net Profits, Net Losses, and other
tax items of the Company and distributions of the Company's assets pursuant to this Agreement
and the Act, but shall not include any right to participate in the management or affairs of the
Company, including, the right to vote on, consent to or otherwise participate in any decision of
the Members.
'Economic Interest Owner" means the owner of an Economic Interest who is not a
Member.
"Entity" means any general partnership, limited partnership, limited liability company,
corporation, joint venture, trust, business trust, cooperative or association or any other
organization that is not a natural person.
“Incapacity” means the physical or mental inability to manage ones personal or financial
affairs as determined by an independent physician selected by the Company and the subject
Member (or his or her guardian or other duly authorized representative, as the case may be) and
in the event of a failure to agree by the Court with jurisdiction in the subject Member’s place of
residency
"Majority Interest" means, at any time, more than fifty percent (50%) of the then
outstanding Units held by Members.
"Manager" means the Persons designated as Managers in Section 5.1 hereof and any
other Person who may become a substitute or additional Manager as provided in Article 5.
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"Member” means each Person who executes a counterpart of this Agreement as a
Member and each Person who may hereafter become a Member. To the extent a Manager has
purchased a Membership Interest in the Company, it will have all the rights of a Member with
respect to such Membership Interest, and the term "Member" as used herein shall include a
Manager to the extent it has purchased a Membership Interest in the Company. If a Person is a
Member immediately prior to the acquisition by such Person of an Economic Interest, such
Person shall have all the rights of a Member with respect to such Economic Interest.
"Membership Interest" means all of a Member's share in the Net Profits, Net Losses, and
other tax items of the Company and distributions of the Company's assets pursuant to this
Agreement and the Act and all of a Member's rights to participate in the management or affairs
of the Company, including the right to vote on, consent to or otherwise participate in any
decision of the Members .
"Member Minimum Gain" has the same meaning as the term "partner nonrecourse debt
minimum gain" in Regulation Section 1.704-2(i).
"Member Nonrecourse Deductions" has the same meaning as the term "partner
nonrecourse deductions" in Regulation Sections 1.7042(i)(l) and (2). The amount of Member
Nonrecourse Deductions for a Company fiscal year shall be determined in accordance with
Regulation Section 1.704-2(i)(2).
'Net Profits" and "Net Losses" shall have the meaning ascribed to those terms in Section
9.5.
"Nonrecourse Deductions" has the meaning set forth in Regulation Section
1.704-2(b)(l). The amount of Nonrecourse Deductions for a Company fiscal year shall be
determined pursuant to Regulation Section 1.704-2(c).
'Nonrecourse Liability" has the meaning set forth in Regulation Section 1.704-2(b)(3).
"Percentage Interest" means with respect to any Unit Holder the percentage determined
based upon the ratio that the number of Units held by such Unit Holder bears to the total number
of outstanding Units.
"Person" means any individual or Entity, and the heirs, executors, administrators, legal
representatives, successors, and assigns of such "Person" where the context so permits.
"Regulations" includes proposed, temporary and final Treasury regulations promulgated
under the Code and the corresponding sections of any regulations subsequently issued that
amend or supersede such regulations.
"Reserves" means, with respect to any fiscal period, funds set aside or amounts allocated
during such period to reserves which shall be maintained in amounts deemed sufficient by the
Manager for working capital and to pay taxes, insurance, debt service or other costs or expenses
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incident to the ownership or operation of the Company's business.
'Unit Holder" means a Person who is a Member or an Economic Interest Owner.
“Unit” means the basic economic ownership interest in the Company, which entitles the
holder to the rights and privileges of a Member of the Company, including a share of the net
profits, net losses, and other tax items of the Company, as well as distributions of the Company’s
assets as provided in this Agreement and the Act. The Company shall issue A Units and B Units
(collectively referred to herein as “Units”), and these Units shall have all of the same rights and
privileges under this Agreement, except for the voting rights described below. A Member who
transfers or otherwise disposes of all of his/her/its Units shall thereby cease to be a Member of
the Company.
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• A Units. Holder of A Units shall be entitled to one vote on all matters requiring Member
approval, for each A Unit owned by them.
• B Units. Except for the voting rights specifically authorized for holders of B Units in
Section 4.2 hereof, holders of B Units shall have no voting rights.
ARTICLE 2 - FORMATION OF COMPANY
2.1 Formation . The Company was formed when the Certificate of Formation was
executed and filed with the office of the Secretary of State in accordance with and pursuant to
the Act. The primary purpose of the Company is to own, develop and manage real estate.
2.2 Name . The name of the Company is "OB Renton Properties, LLC
2.3 Principal Place of Business . The principal place of business of the Company shall
be P.O. Box 726, Bellevue, WA 98009. The Company may locate its places of business at any
other place or places as the Manager may from time to time deem advisable.
2.4 Registered Office and Registered Agent . The Company's initial registered agent
and the address of its initial registered office in the State of Washington is as follows:
P.O. Box 726
Bellevue, WA 98009
Michael O’Brien
The registered office and registered agent may be changed by the Manager from time to
time by filing an amendment to the Certificate of Formation.
2.5 Term. The term of the Company shall be perpetual, unless the Company is earlier
dissolved in accordance with either Article 14 or the Act.
2.6 Authorized Units. The Company is authorized to issue 200,000 A Units and
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200,000 B Units to its Members. If authorized in writing by all the Members holding A Units,
the Manager shall issue additional Units. The initial Members, number of Units issued to them,
and initial capital contributed therefore are as set forth on Schedule 2.6 attached hereto and
incorporated herein by this reference.
ARTICLE 3 - BUSINESS OF COMPANY
The business of the Company shall be:
(a) to own, manage, and lease real property and to carry on any lawful
business or activity which may be conducted by a limited liability company organized under the
Act; and
(b) to exercise all other powers necessary to or reasonably connected with the
Company's business which may be legally exercised by limited liability companies under the
Act.
ARTICLE 4 - NAMES AND ADDRESSES OF MEMBERS
The names and addresses of the Members are set forth on attached Schedule 2.6, as
amended or restated from time to time.
ARTICLE 5 - MANAGERS; RIGHTS AND DUTIES
5.1 Management. The business and affairs of the Company shall be managed by the
Manager. The following person shall serve as Manager of the Company: Michael O’Brien, and
in the event of his disability, unwillingness to act, resignation, removal, or death, the fiduciaries
designated under his Last Will and Testament, including trusts created thereunder, and
fiduciaries designated by him in inter vivos trusts. Managers are sometimes collectively referred
to as the "Manager." Except as otherwise expressly provided in this Agreement, the Manager
shall have full and complete authority, power and discretion to manage and control the business,
affairs and properties of the Company, to make all decisions regarding those matters and to
perform any and all other acts or activities customary or incident to the management of the
Company's business. At any time when there is more than one Manager, both Managers must
jointly take action as is permitted by the Act. Without limiting the generality of the foregoing,
the Manager shall have power and authority, on behalf of the Company:
(i) to acquire property from any Person as the Manager may determine, and
the fact that a Manager or a Member is an Affiliate of such Person shall not prohibit the Manager
from dealing with that Person;
(ii) to borrow money from financial institutions, the Manager, Members, or
Affiliates of the Manager or Members on such terms as the Manager deems appropriate, and in
connection therewith, to hypothecate, encumber and grant security interests in the assets of the
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Company to secure repayment of the borrowed sums;
(iii) to purchase liability and other insurance to protect the Company's
property and business;
(iv) except as provided in Section 6.3, to acquire, improve, manage,
charter, operate, sell, transfer, exchange, encumber, pledge or dispose of any real or personal
property of the Company;
(v) to invest Company funds temporarily in time deposits, short-term
governmental obligations, commercial paper or other short-term investments;
(vi) to execute instruments and documents, including without limitation,
checks, drafts, notes and other negotiable instruments, mortgages or deeds of trust, security
agreements, financing statements, documents providing for the acquisition, mortgage or
disposition of the Company's property, assignments, bills of sale, leases, partnership agreements,
operating agreements of other limited liability companies, and any other instruments or
documents necessary, in the opinion of the Manager, to the business of the Company;
(vii) to employ accountants, legal counsel, managing agents or other
experts to perform services for the Company and to compensate them from Company funds;
(viii) to enter into any and all other agreements with any other Person for
any purpose, in such form as the Manager may approve;
(ix) from time to time open bank accounts in the name of the Company,
and the Manager shall be the sole signatory thereon, unless the Manager determines otherwise;
and
(x) to do and perform all other acts as may be necessary or appropriate to
the conduct of the Company's business.
Unless authorized to do so by this Agreement or by the Manager, no
Member, employee or other agent of the Company shall have any power or authority to bind the
Company in any way, to pledge its credit or to render it liable for any purpose.
5.2 Compensation. The Managers shall receive monthly compensation as may hereafter
be agreed to. The Manager shall also be reimbursed by the Company for reasonable
out-of-pocket expenses incurred by the Manager in connection with the Company's business,
including without limitation expenses incurred in the organization of the Company (as shall
Members) and the placement of the Units.
5.3 Limitation on Liability; Indemnification.
5.3.1 Each Member's and Manager's liability shall be limited as set forth in this
Agreement, the Act and other applicable law, to the fullest extent provided by law and consistent
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with this Agreement. No Member or Manager shall be personally liable, based upon the status of
being a Member and/or Manager, as the case may be, for any debts or losses of the Company
beyond a Member's liability for his respective capital contributions as provided herein, or an
obligation, if any, of a Member to make additional capital contributions already approved in
accordance with this Agreement, except as otherwise provided by law.
5.3.2 The Company shall indemnify the Members and Managers for all costs,
losses, liabilities, and damages paid or accrued by such Member or Manager, and advance
expenses incurred by the Member or Manager, in connection with the business of the Company,
to the fullest extent provided or allowed by the laws of Washington, except that the Company
shall not be liable to indemnify any Member or Manager for any costs, losses, liabilities or
damages to the extent arising from:
(a) Any breach of a Member's or Manager's duty of loyalty to the
Company or its Members as described in this Agreement or in the Act;
(b) Acts or omissions not in good faith which involve intentional
misconduct or a knowing violation of law;
(c) Any unlawful distribution under the Act; or
(d) Any transaction from which the Member or Manager derives an
improper personal benefit.
5.3.3 Any indemnification required to be made by the Company shall be made
promptly following the fixing of the liability, loss, damage, cost or expense incurred or suffered
by a final judgment of any court, settlement, contract or otherwise. In addition, the Company
may advance funds to a Person claiming indemnification under this Section 5.3 for legal
expenses and other costs incurred as a result of a legal action brought against such Person only if
(i) the legal action relates to the performance of duties or services by the Person on behalf of the
Company, (ii) the legal action is initiated by a party other than a Member, and (iii) such Person
undertakes to repay the advanced funds to the Company if it is determined that such Person is
not entitled to indemnification pursuant to the terms of this Agreement.
5.4 Removal. At a meeting called expressly for that purpose, the Manager may be
removed at any time, with or without cause, by the affirmative vote of the holders of not less
than 67% of the issued A Units. The removal of a Manager who is also a Member shall not
affect the Manager's rights as a Member and shall not constitute a withdrawal of a Member.
5.5 Vacancies. Subject to successor designation as provided in Section 5.1, the vacancy
of a Manager shall be filled by the affirmative vote of Members owning 51% of the outstanding
A Units.
ARTICLE 6 -RIGHTS AND OBLIGATIONS OF MEMBERS
6.1 Limitation of Liability. Each Member's liability shall be limited as set forth in this
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Agreement and the Act.
6.2 Liability for Company Obligations. Members shall not be personally liable for any
debts, obligations or liabilities of the Company beyond their respective Capital Contributions and
any obligation of the Members under Section 8.1 or 8.2 to make Capital Contributions, except as
otherwise provided by law.
6.3 Approval of Sale of All Assets. The Company shall not sell, exchange or otherwise
dispose of all, or substantially all, of its assets without the affirmative vote of the holders of 67%
of the outstanding A Units held by Members.
6.4 Inspection of Records. Upon reasonable request, each Member shall have the right
to inspect and copy at such Member's expense, during ordinary business hours the records
required to be maintained by the Company pursuant to Section 11.5.
6.5 No Priority and Return of Capital. Except as expressly provided in Article 9 or 10,
no Unit Holder shall have priority over any other Unit Holder, either as to the return of Capital
Contributions or as to Net Profits, Net Losses or distributions; provided, that this Section 6.5
shall not apply to loans made by a Member to the Company.
6.6 Withdrawal of Member. Except as expressly permitted in this Agreement, no
Member shall voluntarily resign or otherwise withdraw as a Member. Unless otherwise approved
by Members holding 67% of the outstanding A Units, a Member who resigns or withdraws shall
be entitled to receive only those distributions to which such Person would have been entitled had
such Person remained a Member (and only at such times as such distribution would have been
made had such Person remained a Member). Except as otherwise expressly provided herein, a
resigning or withdrawing Member shall become an Economic Interest Owner. The remedy for
breach of this Section 6.6 shall be monetary damages (and not specific performance), which may
be offset against distributions by the Company to which such Person would otherwise be
entitled.
6.7 Pre-emptive Right. Notwithstanding any other provision herein or as otherwise
may be provided by the Act, Members shall have a pre-emptive right to acquire additional Units
of the same class owned by them; provided, however, that Company shall not issue any
additional Units unless approved by the Manager and Members holding not less than 67% of the
then outstanding A Units.
ARTICLE 7 - MEETINGS OF MEMBERS
7.1 Annual Meeting. The annual meeting of the Members shall be held on the third
Tuesday of October of each year, or at such other time as shall be determined by the Members,
for the purpose of the transaction of such business as may come before the meeting.
7.2 Special Meetings. Special meetings of the Members, for any purpose or purposes,
may be called by the Manager or by Members holding at least 67% of the A Units held by
Members or 50% of the B Units held by Members.
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7.3 Place of Meetings. The Manager or the Members, if the Members call the meeting
as provided in Section 7.2, may designate any place within King County, State of Washington, as
the place of meeting for any meeting of the Members. If no designation is made, or if a special
meeting is called, the place of meeting shall be the principal office of the Company specified in
Section 2.3.
7.4 Notice of Meetings. Written notice stating the place, day and hour of the meeting
and, in the case of a special meeting, the purpose or purposes for which the meeting is called
shall be delivered not less than ten (10) nor more than fifty (50) days before the date of the
meeting, either personally or by mail, by or at the direction of the Manager or the Members
calling the meeting, to each Member. If mailed, such notice shall be deemed to be delivered two
calendar days after being deposited in the United States Mail, addressed to the Member as
specified in Section 16.1, with postage thereon prepaid.
7.5 Record Date. For the purpose of determining Members entitled to notice of or to
vote at any meeting of Members or any adjourmnent thereof, or Members entitled to receive
payment of any distribution, the date on which notice of the meeting is mailed or the date on
which the resolution declaring such distribution is adopted, as the case may be, shall be the
record date for such determination of Members. When a determination of Members entitled to
vote at any meeting of Members has been made as provided in this Section, such determination
shall apply to any adjournment thereof.
7.6 Quorum. Members owning 67% or more of the outstanding A Units shall constitute
a quorum at any meeting of Members, whether represented in person or by proxy. The Members
present at a duly organized meeting at which a quorum is present may continue to transact
business until adjournment, notwithstanding the withdrawal during such meeting of that number
of Units whose absence would cause less than a quorum.
7.7 Manner of Acting. If a quorum is present, the affirmative vote of Members holding
more than 50% of the A Units represented at the meeting in person or by proxy shall be the act of
the Members, except as otherwise provided herein.
7.8 Proxies. At all meetings of Members an A Unit Member may vote in person or by
proxy executed in writing by the Member. Such proxy shall be filed with the Manager before or
at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its
execution, unless otherwise provided in the proxy.
7.9 Action by Members Without a Meeting. Action required or permitted to be taken
at a meeting of Members may be taken without a meeting if the action is evidenced by one or
more written consents describing the action taken, executed by Members entitled to vote thereon
and delivered to the Manager for inclusion in the Company's minutes. Action taken under this
Section 7.9 is effective when all Members entitled to vote thereon have signed such consents.
Unless such consents specify different effective date, the record date for determining Members
entitled to take action without a meeting shall be the date the first Member signs a consent.
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7.10 Waiver of Notice. When any notice is required to be given to a Member, a waiver
thereof in writing signed by the Member entitled to such notice, whether before, at, or after the
time stated therein, shall be equivalent to the giving of such notice.
7.11 Voting Rights of Members. On matters set forth in this Agreement or in the Act
requiring a vote of the A Unit Members, each A Unit Member shall have one vote per A Unit
owned by such Member.
7.12 No Participation in Management. Except as otherwise set forth in this
Agreement or in the Act, Members shall take no part in the management or control of the
Company business, and shall have no right or authority to act for the Company or to vote on
matters.
7.13 Telephonic Meetings. With respect to a particular meeting or generally with
respect to future meetings, any or all Members may participate in the meeting by, or may permit
the conduct of the meeting through, use of any means of communication by which all Members
participating may simultaneously hear each other; provided the notice of such a meeting shall
state that the Members may participate in such a fashion and describe how any Member may
notify the Company of the Member's desire to be included in the meeting. A Member
participating in such a meeting is deemed to be present in person at such meeting.
CONTRIBUTIONS TO THE COMPANY AND CAPITALARTICLE 8
ACCOUNTS
8.1 Members' Capital Contributions. Each Member shall contribute such amount as is
set forth in attached Schedule 2.6 as such Member's share of the Members' Capital Contribution.
Members shall not be required to make additional
Capital Contributions except upon the affirmative vote of Members owning at least 67% of the
outstanding A Units. Each Member shall pay to the Company any such additional Capital
Contribution no later than thirty (30) days following the date of such affirmative vote approving
the same. Nothing contained in this Section 8.2 is or shall be deemed to be for the benefit of any
Person other than the Members and the Company, and no such Person shall under any
circumstances have any right to compel any actions or payments by the Members.
8.2 Additional Contributions.
8.3 Capital Accounts.
8.3.1 Establishment and Maintenance. A separate Capital Account will be
maintained for each Unit Holder throughout the term of the Company in accordance with the
rules of Regulation Section 1,704-I(b)(2)(iv). Each Unit Holder's Capital Account will be
increased by (1) the amount of money contributed by such Unit Holder to the Company; (2) the
fair market value of property contributed by such Unit Holder to the Company (net of liabilities
secured by such contributed property that the Company is considered to assume or take the
property subject to under Code Section 752); (3) allocations to such Unit Holder of Net Profits;
(4) any items in the nature of income and gain that are specially allocated to the Unit Holder
pursuant to Sections 9.2 and 9.3; and (5) allocations to such Unit Holder of income and gain
exempt from federal income tax. Each Unit Holder's Capital Account will be decreased by (1)
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the amount of money distributed to such Unit Holder by the Company; (2) the fair market value
of property distributed to such Unit Holder by the Company (net of liabilities secured by such
distributed property that such Unit Holder is considered to assume or take the property subject to
Code Section 752); (3) allocations to such Unit Holder of expenditures described in Code
Section 705(a)(2)(B); (4) any items in the nature of deduction and loss that are specially
allocated to the Unit Holder pursuant to Sections 9.2 and 9.3; and (5) allocations to such Unit
Holder of Net Losses. In the event of a permitted sale or exchange of a Membership Interest or
an Economic Interest in the Company, the Capital Account of the transferor shall become the
Capital Account of the transferee to the extent it relates to the transferred Membership Interest or
Economic Interest.
8.3.2 Compliance with Regulations. The manner in which Capital Accounts
are to be maintained pursuant to this Section 8.3 is intended to comply with the requirements of
Code Section 704(b) and the Regulations promulgated thereunder. If in the opinion of the
Company's legal counsel or accountants the manner in which Capital Accounts are to be
maintained pursuant to the preceding provisions of this Section 8.3 should be modified in order
to comply with Code Section 704(b) and the Regulations thereunder, then notwithstanding
anything to the contrary contained in the preceding provisions of this Section 8.3, the method in
which Capital Accounts are maintained shall be so I modified; provided, however, that any
change in the manner of maintaining Capital Accounts shall not materially alter the economic
agreement between or among the Members.
8.4 Withdrawal or Reduction of Members’ Contributions to Capital. A Member
shall not receive out of the Company's property any part of its Capital Contribution until all
liabilities of the Company, except liabilities to Members on account of their Capital
Contributions, have been paid or there remains property of the Company sufficient to pay them.
A Member, irrespective of the nature of its Capital Contribution, has only the right to demand
and receive cash in return for its Capital Contribution.
8.5 Interest on and Return of Capital Contributions. No Member shall be entitled to
interest on its Capital Contribution or to return of its Capital Contribution, except as otherwise
specifically provided for herein
ARTICLE 9 -ALLOCATIONS OF NET PROFITS AND LOSSES
9.1 Allocation of Net Profit and Loss In General.
9.1.1 Allocation of Net Profit or Loss. After giving effect to the special
allocations set forth in Schedule 9.1.1, the Net Profit or Net Loss for any fiscal year of the
Company shall be allocated among the Unit Holders in accordance with their respective
Percentage Interests.
9.1.2 Limitation. The Net Loss allocated to each Member for any Company
fiscal year pursuant to Section 9.1.1 shall not exceed the maximum amount of Net Loss that can
be so allocated without causing such Member to have a Deficit Capital Account at the end of the
fiscal year. All Net Losses in excess of the limitation set forth in this Section 9.1.2 shall be
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allocated to the other Unit Holders who do not have Deficit Capital Accounts in proportion to
their respective Percentage Interests.
ARTICLE 10 - DISTRIBUTIONS
10.1 Cash Distributions.
10.1.1 Non-liquidating Distribution. Distributions of Distributable Cash,
other than distributions in liquidation pursuant to Section 10.1.2, shall be made to the Unit
Holders as the Managers shall determine from time to time, provided however, each year (or
more frequently) a distribution in the amount of the federal and state income taxes to be paid by
Members on the income of the Company must be made and shall be paid by the Company on
behalf of the Member, and (ii) the balance of Distributable Cash shall be made to the Members.
10.1.2 Distributions in Liquidation. Notwithstanding Section 10.1.1,
distributions in liquidation of the Company shall be made to each Unit Holder in the manner set
forth in Section 14.
10.2 Distributions in Kind. Non-cash assets, if any, shall be distributed in a manner that
reflects how cash proceeds from the sale of such assets for fair market value would have been
distributed (after any unrealized gain or loss attributable to such non-cash assets has been
allocated among the Unit Holders in accordance with Article 9).
10.3 Withholding; Amounts Withheld Treated as Distributions. The Manager is
authorized to withhold from distributions, or with respect to allocations or payments, to Unit
Holders and to pay over to the appropriate federal, state or local governmental authority any
amounts required to be withheld pursuant to the Code or provisions of applicable state or local
law. All amounts withheld pursuant to the preceding sentence in connection with any payment,
distribution or allocation to any Unit Holder shall be treated as amounts distributed to such Unit
Holder pursuant to this Article 10 for all purposes of this Agreement.
10.4 Limitation Upon Distributions. No distribution shall be declared and paid unless, after
the distribution is made, the assets of the Company are in excess of all liabilities of the
Company, except liabilities to Members on account of their contributions.
ARTICLE 11 -ACCOUNTING, BOOKS, AND RECORDS
11.1 Accounting Principles. The Company's books and records shall be kept, and its income
tax returns prepared, under such permissible method of accounting, consistently applied, as the
Manager determines is in the best interest of the Company and its Members.
11.2 Interest on and Return of Capital Contributions. No Member shall be entitled to
interest on its Capital Contribution or to return of its Capital Contribution, except as otherwise
specifically provided for herein.
11.3 Loans to Company. Subject to the powers of a Manager and the rights of Members,
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nothing in this Agreement shall prevent any Member from making secured or unsecured loans to
the Company.
f11.4 Accounting Period. The Company's accounting period shall be the calendar year.
11.5 Records, Audits and Reports. At the expense of the Company, the Manager shall
maintain records and accounts of all operations and expenditures of the Company and make all
available to inspection and copying by Members upon request. At a minimum the Company
shall keep at its principal place of business the following records:
(a) A current list and past list, setting forth the full name and last known
mailing address of each Member, Economic Interest Owner and Manager;
(b) A copy of the Certificate of Formation and all amendments thereto;
(c) Copies of this Agreement and all amendments hereto;
(d) Copies of the Company's federal, state, and local tax returns and reports, if
any, for the three most recent years;
(e) Minutes of every meeting of the members and any written consents
obtained from Members for actions taken by Members without a meeting; and
(I) Copies of the Company's financial statements for the three most recent
years.
11.6 Tax Matters Partner .
11.6.1 Designation. Michael O’Brien shall be the "tax matters partner" of the Company
for purposes of Code Section 6221 et seq. and corresponding provisions of any state or local tax
law.
11.6.2 Expenses of Tax Matters Partner; Indemnification. The Company shall
indemnify and reimburse the tax matters partner for all reasonable expenses, including legal and
accounting fees, claims, liabilities, losses and damages incurred in connection with any
administrative or judicial proceeding with respect to the tax liability of the Unit Holders
attributable to the Company. The payment of all such expenses shall be made before any
distributions are made to Unit Holders (and such expenses shall be taken into consideration for
purposes of determining Distributable Cash) or any discretionary Reserves are set aside by the
Manager. Neither the tax matters partner nor any Member shall have any obligation to provide
funds for such purpose. The provisions for exculpation and indemnification of the Manager set
forth in Section 5.3 of this Agreement shall be fully applicable to the Member acting as tax
matters person for the Company.
11.7 Returns and Other Elections. The Manager shall cause the preparation and timely
filing of all tax and information returns required to be filed by the Company pursuant to the Code
14LLC AGREEMENT
and all other tax and information returns deemed necessary and required in each jurisdiction in
which the Company does business. Copies of such returns, or pertinent information therefrom,
shall be furnished to the Unit Holders within a reasonable time after the end of the Company's
fiscal year.
Except as otherwise expressly provided to the contrary in this Agreement, all elections
permitted to be made by the Company under federal or state laws shall be made by the Manager
in his or its sole discretion.
ARTICLE 12 - TRANSFERABILITY
12.1 General . Except as otherwise expressly provided in this Agreement, neither a
Member nor an Economic Interest Owner shall have the right to:
(a) sell, assign, pledge, transfer, exchange or otherwise transfer for or without
consideration, (collectively, "sell" or "sale") all or any part of his/its Membership Interest or
Economic Interest, or
(b) gift, bequeath or otherwise transfer for no consideration whether or not by
operation of law (collectively "gift"), except in the case of bankruptcy, all or any part of his/its
Membership Interest or Economic Interest. Each Member and Economic Interest Owner hereby
acknowledges the reasonableness of the restrictions on sale and gift of Membership Interests and
Economic Interests imposed by this Agreement in view of the Company's purposes and the
relationship of the Members and Economic Interest Owners. Accordingly, the restrictions on sale
and gift contained herein shall be specifically enforceable. If consented to by all other Members,
if any Unit Holder pledges or otherwise encumbers any of its Membership Interest or Economic
Interest as security for repayment of a liability, any such pledge or hypothecation shall be made
pursuant to a pledge or hypothecation agreement that requires the pledgee or secured party to be
bound by all the terms and conditions of this Article 12.
Notwithstanding the foregoing, (i) Michael O’Brien may sell or gift his Units without
restriction. Other Unit Holders and Economic Interest Holders are precluded from selling or
gifting Units and Economic Interests to other than Michael O’Brien or his lineal descendants
without first complying with Section 12.2.
12.2 First Refusal Rights.
(a) A Unit Holder or Economic Interest Holder desiring to gift or sell all or
any portion of its Membership Interest or Economic Interest to a third party shall obtain from
such third party purchaser a bona fide written offer to purchase such Interest, stating the terms
and conditions upon which the purchase is to be made and the consideration offered therefore.
Such Unit Holder shall give written notice to the other Unit Holders and the Manager of its
intention to so transfer such Interest. Such notice shall include a copy of the bona fide written
offer and any documents referenced therein or otherwise pertaining thereto, and shall further set
forth the complete terms of the written offer to purchase and the name and address of the
15LLC AGREEMENT
proposed third party purchaser. If the Unit Holder or Economic Interest Holder desires to gift
the Units or Economic Interest, then in lieu of obtaining a written offer as provided above, the
offer to the other Unit Holders shall be the fair market value of the Units or Economic Interests.
(b) The other Unit Holders, shall, on a basis pro rata to their Units or on a
basis pro rata to the Units of those remaining Unit Holders exercising their first refusal rights,
have the first right to purchase all (but not less than all) of the Interests proposed to be sold by
the selling Unit Holder upon the same terms and conditions stated in the notice given pursuant to
Section 12.2(a) by giving written notice to the other Unit Holders and the Manager within twenty
(20) days after such notice from the selling/gifting Unit Holder. The failure of a Unit Holder to
so notify the other Unit Holders and the Manager of its desire to exercise its first refusal rights
within said twenty (20) day period as required by this Section 12.2(b) shall result in the
termination of such Unit Holder’s first refusal rights.
Within ten (10) days after expiration of the twenty (20) day period specified
in the preceding paragraph, the Manager shall notify those Unit Holders electing to exercise their
first refusal rights of any Units or Economic Interests that the other Unit Holders did not elect to
purchase. Those Unit Holders exercising first refusal rights in accordance with the preceding
paragraph shall then notify the Manager and the other purchasing Unit Holders whether they
elect to purchase such remaining Units or Economic Interests, which shall be pro rata or
allocated in such other manner as the purchasing Unit Holders shall agree. If no such notification
is received by the Manager from any such Unit Holders in accordance with this paragraph, no
Unit Holder shall have any further first refusal rights with respect to such Units or Economic
Interests. If Unit Holders have elected to purchase all of the Units or Economic Interests offered
by the selling/gifting party, the selling/gifting Unit Holder or Economic Interest Holder shall sell
such Units/Economic Interests upon the same terms and conditions specified in the notice
required by Section 12.2(a) or as determined in Section 12.4 (c) and paid as in Section 12.4(d),
whichever is elected by the purchasing Unit Holder or Company, and the purchasing Unit
Holders shall have the right to close the purchase within thirty (30) days after receipt of
notification from the Manager that such Unit Holders have elected to purchase the selling Unit
Holder's Units or Economic Interests. If Unit Holders do not elect to purchase all of the
Units/Economic Interests offered by the selling Unit Holder in accordance with this Section 12.2,
then the selling/gifting Unit Holder shall be entitled to sell/gift all of his/its Units to the third
party in accordance with the terms and conditions upon which the purchase/gift is to be made as
specified in the notice under Section 12.2(a). However, if such sale/gift is not completed within
thirty (30) days following expiration of the other Unit Holders' first refusal rights under this
Section 12.2, then the selling Unit Holder/Economic Interest Holder shall not be entitled to
complete the sale/gift to such third party and the selling/gifting Unit Holder's Units or Economic
Interests shall continue to be subject to the rights of first refusal set forth in this Section 12.2
with respect to any proposed subsequent transfer.
(c) Upon the sale or the gift of a Membership Interest or an Economic Interest,
and as a condition to recognizing the effectiveness and binding nature of any sale or gift and
(subject to Section 12.3, below) substitution of a Person as a new Unit Holder, the Manager may
require the transferring Unit Holder and the proposed purchaser, donee or successor-in-interest,
as the case may be to execute, acknowledge and deliver to the Manager such instruments of
16LLC AGREEMENT
transfer, assignment and assumption and such other agreements and to perform all such other
acts that the Manager may deem necessary or desirable to:
(i) constitute such Person as a Unit Holder;
(ii) confirm that the Person desiring to become a Unit Holder, has
accepted, assumed and agreed to be subject and bound by all of the terms, obligations and
conditions of this Agreement (whether such Person is to be admitted as a new Member or will
merely be an Economic Interest Owner), including the enforceability of all provisions of this
Section 12.4, including options to purchase, that remain unchanged;
(iii) maintain the status of the Company as a partnership for federal tax
purposes; and
(iv) assure compliance with any applicable state and federal laws,
including securities laws and regulations.
(d) Any sale or gift of a Membership. Interest or Economic Interest or
admission of a Member in compliance with this Article 12 shall be deemed effective on the later
of the last day of the calendar month in which the remaining Members' consent thereto was
given, or on such date that the transferor and the transferee both comply with Section 12.2(c).
The transferring Unit Holder hereby indemnifies the Company and the Manager against any and
all loss, damage, or expense (including, without limitation, tax liabilities or loss of tax benefits)
arising directly or indirectly as a result of any transfer or purported transfer in violation of this
Article 12.
Transferee Not Member in Absence of Consent.12.3
(a) Notwithstanding anything to the contrary in this Article 12, if the sale or
gift of a Member's Membership Interest or Economic Interest to a transferee or donee which is
not a Member immediately prior to the sale or gift is not approved in writing by the Manager and
Members owning 50% or more of the A Units, in their discretion, then the proposed transferee or
donee shall have no right to participate in the management of the business and affairs of the
Company or to become a Member. Such transferee or donee shall be merely an Economic
Interest Owner.
(b) Promptly following any sale or gift of a Member's Economic Interest
which does not at the same time transfer the balance of the rights associated with such Person's
Membership Interest, the Company shall purchase from such Person, and such Person shall sell
to the Company for a purchase price of $100, all such remaining rights and interests retained by
such person which immediately prior to such sale or gift were associated with the transferred
Economic Interest. The acquisition by the Company of such Person's rights shall not cause
dissolution of the Company and such Person shall no longer be a Member.
Purchase of Units Upon Terminating Event12.4
17LLC AGREEMENT
i
(a) Definitions. As used in this section, "Terminating Event" means any
event of dissociation provided in the Washington limited liability company statutes, or any
breach of this Agreement, including without limitation:
(i) The voluntary or involuntary dissolution (subject to reinstatement
rights) of a Unit Holder or Economic Interest Holder, filing of a voluntary or involuntary petition
with respect to a Unit Holder or its majority owner or Economic Interest Holder under the federal
Bankruptcy Code or comparable state law, if such proceeding is not terminated within thirty (30)
days of filing, or the appointment of a receiver or manager for the creditors of a Unit Holder or
its majority owner or Economic Interest Holder;
i
(ii) Any event resulting in the sale or gift of a Unit or Economic Interest,
in violation of the terms and conditions of this Agreement, by operation of law or otherwise,
including without limitation, any transfer as a consequence of a decree of marital dissolution or
separation;
(iii) The death or Incapacity of a Unit Holder or Economic Interest Holder;
(iv) The withdrawal of a Member;
(v) The Unit Holder or Economic Interest Holder refusing or failing
execute credit guaranties demanded by lenders to the Company on loans approved by the
Manager.
(b) Option. If a Member or Economic Interest Owner incurs a Terminating
Event, such Person ("Terminated Person") or its legal representative shall promptly give written
notice thereof to the Members and Manager. Except as otherwise provided herein, in the event of
a Terminating Event, the Company shall have the option to purchase all, but not less than all, of
the Units owned by the Terminated Person (including any community interest of the Terminated
Person's spouse) and if the Company elects not to purchase the Units then the other Members
have the option of purchasing the Units on a pro-rata basis. If the Company or the Members
choose to exercise the option, it/they shall do so by delivering written notice thereof to the
Terminated Person's or his legal representative within one hundred eighty (180) days after the
end of the month in which the Manager and Members have actual knowledge of the Terminating
Event; provided, in the case of the death of a Member, the period for exercising the option shall
be for the period of three hundred sixty five (365) days after the end of the month in which the
Manager receives written notice of the Terminating Event. Failure of the Company or Members
to give such notice within the required period shall be deemed to be a decision not to exercise the
option, and the option shall terminate.
(c) Purchase Price. The purchase price (the "Purchase Price") for the Units
purchased pursuant to this section shall be the fair market value thereof, determined by mutual
agreement of the parties to that sale/redemption transaction; provided, if they are unable to agree
on the Purchase Price within thirty (60) days after the commencement of negotiations, then the
party or parties who exercised the purchase option (or in the event of the Estate or person
inheriting the decedents Units demands purchase) may retract it without further obligation or
18LLC AGREEMENT
liability, and if not retracted the Purchase Price shall be as follows: by the opinion of an appraiser
selected to the parties to the transaction as to the fair market value of the Units being
sold/redeemed, with consideration of discounts for lack of marketability and minority interest. If
the parties are unable to agree on the appraiser, the appraiser shall be appointed by the
Company’s Certified Public Accountant, and shall be one with experience in the valuation of real
estate.
(d) Closing. The closing shall take place within thirty (30) days after the
determination of the Purchase Price, at which time the Company or the purchasing Members, as
the case may be, shall pay as a down payment to the Terminated Person or its legal
representative not less than 20% of the Purchase Price, and the balance amortized over a term of
120 months, including interest at the Wall Street Journal prime rate as of the closing date, with
the full sum of principle and interest due in full within five (5) years from the date of closing.
There is a right of prepayment without penalty. The Company/Member(s) and the Terminated
Person shall execute and deliver all conveyance documents and other documents necessary to
effectuate the transfer. The Units purchased shall be pledged as security by the purchaser(s)
pursuant to a pledge agreement attached as Exhibit 12.4 (d).
(e) Outstanding Debts and Guaranties. At the closing, the Company shall
also repay any outstanding loans which the Company owes to the Terminated Person, and the
Company shall be entitled to an offset against the Purchase Price for any indebtedness owed by
the Terminated Person to the Company. Moreover, the Company shall obtain a release of any
personal obligation of the Terminated Person with respect to any outstanding indebtedness
associated with the Company which was approved by the Manager at the time it was incurred;
provided, if the release is not possible after a good faith effort by the Company, then the
Company shall indemnify, defend and hold the Terminated Person and its successors harmless
from said indebtedness. If the Members are purchasing the Units of the Terminated Person, then
at Closing any indebtedness owed by the Terminated Person to the Company shall be paid in full
by the Terminated Person/Estate.
ARTICLE 13 - ADDITIONAL MEMBERS
No additional Members may be admitted to the Company membership, unless the Manager
and Members owning 50% or more of the issued A Units vote in favor of the admission of
additional Members, without prejudice to pre-emptive rights provided for herein.
ARTICLE 14 - DISSOLUTION AND TERMINATION
14.1 Dissolution. The Company shall be dissolved upon the occurrence of any of
the following events:
(a) upon expiration of the term specified in Section 2.5;
(b) by the decision of the Manager, if Michael O’Brien, and if the
19LLC AGREEMENT
Manager is other than Michael O’Brien by written agreement of the holders of not less than 60%
of the issued A Units.
14.2 Allocation of Net Profit and Loss in Liquidation. The allocation of Net
Profit, Net Loss and other items of the Company following the date of dissolution, including but
not limited to gain or loss upon the sale of all or substantially all of the Company's assets, shall
be determined in accordance with the provisions of Articles 9 and 10 and shall be credited or
charged to the Capital Accounts of the Unit Holders based upon the number of Units owned.
14.3 Winding Up, Liquidation and Distribution of Assets. Upon dissolution,
the Manager shall immediately proceed to wind up the affairs of the Company. The Manager
shall sell or otherwise liquidate all of the Company's assets as promptly as practicable (except to
the extent the Manager may determine to distribute any assets to the Unit Holders in kind) and
shall apply the proceeds of such sale and the remaining Company assets in the following order of
priority:
(a) Payment of creditors, including Members and Managers who are creditors,
to the extent otherwise permitted by law, in satisfaction of liabilities of the Company, other than
liabilities for distributions to Members;
(b) To establish any reserves that the Manager deems reasonably necessary
for contingent or unforeseen obligations of the Company and, at the expiration of such period as
the Manager shall deem advisable, the balance then remaining in the maimer provided in
Paragraph (c) below;
(c) By the end of the taxable year in which the liquidation occurs (or, if later,
within ninety (90) days after the date of such liquidation), to the Unit Holders in proportion to
the positive balances of their respective Capital Accounts, as determined after taking into
account all Capital Account adjustments for the taxable year during which the liquidation occurs
(other than those made pursuant to this Paragraph (c)).
14.4. No Obligation to Restore Negative Capital Account Balance on Liquidation.
Notwithstanding anything to the contrary in this Agreement, upon a liquidation within the
meaning of Regulation Section 1.704-l(b)(2)(ii)(g), if any Unit Holder has a negative Capital
Account balance (after giving effect to all contributions, distributions, allocations and other
Capital Account adjustments for all taxable years, including the year during which such
liquidation occurs), such Unit Holder shall have no obligation to make any Capital Contribution
to the Company, and the negative balance of such Unit Holder's Capital Account shall not be
considered a debt owed by such Unit Holder to the Company or to any other Person for any
purpose whatsoever.
The Manager shall comply with any applicable requirements of14.5 Termination.
applicable law pertaining to the winding up of the affairs of the Company and the final
distribution of its assets. Upon completion of the winding up, liquidation and distribution of the
assets, the Company shall be deemed terminated.
20LLC AGREEMENT
14.6 Certificate of Cancellation. When all debts, liabilities and obligations have been paid
and discharged or adequate provisions have been made therefore and all of the remaining
property and assets have been distributed to the Unit Holders, the Manager shall file a certificate
of cancellation as required by the Act. Upon filing the certificate of cancellation, the existence of
the Company shall cease, except as otherwise provided in the Act.
14.7 Return of Contribution Nonrecourse to Other Members. Except as provided by law
or as expressly provided in this Agreement, upon dissolution each Unit Holder shall look solely
to the assets of the Company for the return of its Capital Contribution. If the property remaining
after the payment or discharge of liabilities of the Company is insufficient to return the
contributions of Members, no Unit Holder shall have recourse against any other Unit Holder.
ARTICLE 15 - INDEPENDENT ACTIVITIES OF MANAGERS AND MEMBERS
Any Manager and Member may engage in or possess an interest in other business ventures of
every nature and description, independently or with others, including but not limited to, the
ownership, financing, management, employment by, lending to or otherwise participating in
businesses which are similar to the business of the Company, and neither the Company nor any
of the Managers or Unit Holders shall have any right by virtue of this Agreement in and to such
independent ventures or to the income or profits therefrom, except as may otherwise be provided
for under the terms of employment or other agreements with the Company.
ARTICLE 16 -MISCELLANEOUS PROVISIONS
16.1 Notices. Any notice, demand, or communication required or permitted under this
Agreement shall be deemed to have been duly given if delivered personally to the party to whom
directed or, if mailed by registered or certified mail, postage and charges prepaid, addressed (a) if
to a Member, to the Member's address specified on attached Schedule 1, (b) if to the Company,
to the address specified in Section 2.3, and (c) if to the Manager, to the address specified in
Section 2.3. Except as otherwise provided herein, any such notice shall be deemed to be given
when personally delivered or, if mailed, three (3) business days after the date of mailing. A
Member, the Company or the Manager may change its address for the purposes of notices
hereunder by giving notice to the others specifying such changed address in the manner specified
in this Section 16.1.
16.2 Governing Law. This Agreement shall be construed and enforced in accordance with
the internal laws of the State of Washington.
16.3 Amendments . This Agreement may not be amended except by the unanimous written
agreement of all of the Members and the Manager.
16.4 Construction . Whenever the singular number is used in this Agreement and when
required by the context, the same shall include the plural and vice versa, and the masculine
gender shall include the feminine and neuter genders and vice versa.
21LLC AGREEMENT
I
16.5 Headings . The headings in this Agreement are inserted for convenience only and shall
not affect the interpretations of this Agreement.
16.6 Waivers. The failure of any Person to seek redress for violation of or to insist upon the
strict performance of any covenant or condition of this Agreement shall not prevent a subsequent
act, which would have originally constituted a violation, from having the effect of an original
violation.
16.7 Rights and Remedies Cumulative. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy shall not preclude or waive the
right to use any or all other remedies. Said rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance or otherwise.
16.8 Severability. If any provision of this Agreement or the application thereof to any
Person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of
this Agreement and the application thereof shall not be affected and shall be enforceable to the
fullest extent permitted by law.
16.9 Heirs, Successors and Assigns. Each of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of the parties hereto
and, to the extent permitted by this Agreement, their respective heirs, legal representatives,
successors and assigns.
16.10 Creditors. None of the provisions of this Agreement shall be for the benefit of or
enforceable by any creditors of the Company.
16.11 Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original and all of which shall constitute one and the same instrument.
16.12 Investment Representations. The Units have not been registered under the Securities
Act of 1933, the Securities Act of Washington or any other state securities laws (collectively, the
"Securities Acts") because the Company is issuing the Units in reliance upon the exemptions
from the registration requirements of the Securities Acts, and the Company is relying upon the
fact that the Units are to be held by each Unit Holder for investment.
Accordingly, each Unit Holder hereby confirms the Units have been acquired for such
Unit Holder's own account, for investment and not with a view to the resale or distribution
thereof and may not be offered or sold to anyone unless there is an effective registration or other
qualification relating thereto under all applicable Securities Acts or unless such Unit Holder
delivers to the Company an opinion of counsel, satisfactory to the Company, that such
registration or other qualification is not required. The Unit Holders understand that the
Company is under no obligation to register the Units or to assist any Unit Holder in complying
with any exemption from registration under the Securities Acts.
16.13 Dispute Resolution. In the event of any disagreement between the parties as to the
interpretation or enforcement of this Agreement, or if the Members do not reach agreement on
22LLC AGREEMENT
fc'
any issue which requires unanimous agreement of the Members, the parties shall first, if
reasonably possible, attempt to resolve the matter by mediation. The parties shall make all
reasonable efforts to select a mutually agreeable mediator. If the parties are unable to agree upon
a mediator, then, unless the parties agree otherwise, the Judicial Arbitration and Mediation
Service shall select a mediator. No arbitration may proceed to resolve a dispute until after the
mediator determines that the parties have reached an impasse and that further mediation would
not likely result in success. Each party shall pay its attorneys’ fees and costs for the mediation
and one-half of the mediator’s fees and costs.
If mediation reaches such an impasse, said dispute shall be determined by binding arbitration
in accordance with the laws of the State of Washington. The mediator shall not be the arbitrator,
unless the parties so mutually stipulate. If the parties are not able to agree upon a single
arbitrator within ten (10) days following demand therefore, then the arbitrator shall be appointed
by the Judicial Arbitration and Mediation Service and the arbitrator may be a member/employee
of it.
Each party shall pay one-half of the arbitrator’s fees and costs, unless one party is ruled the
prevailing party by the arbitrator, in which case the arbitrator, subsequent to the arbitration itself,
may award the prevailing party the arbitrator’s fees and costs and the prevailing party’s attorneys
fees and costs with the fees and costs to be determined subsequent to the arbitration itself. Any
mediation or arbitration shall be brought in King County, Washington unless the parties mutually
agree on a different location.
16.14 Joinder. If Michael O’Brien as an A Unit Holder desires to sell all his Units to a third
party, all other A and B Unit Holders will join in that sale upon the request of Michael O’Brien
and shall receive the same price per Unit as does Michael O’Brien. In the event of Michael
O’Brien’s death, if 60% or more of the A Units desire to sell their Units to a third party, all other
A and B Unit Holders will join in that sale upon the request of those desiring to so sell and shall
receive the same price per Unit as do those making the request.
(Signature page follows)
23LLC AGREEMENT
N
Executed the undersigned Members effective as of the date first above written.
OB RENTON PROPERTIES, LLC
MICHAEL O’BRIENMICHAEL O’BRIEN, Manager
24LLC AGREEMENT
Schedule 2.6
Unit Holders
Initial
Percentage
Number
of B Units
Number
of A Units
Cash
Contribution
Name
100%9,000$50,000 1,000Michael O’Brien
25LLC AGREEMENT
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Schedule 9.1.1
Special Tax Provisions
1. Definitions.
"Company Minimum Gain" has the same meaning as the term "partnership
minimum gain" in Regulation Sections 1.704-2(b)(2) and 1.704-2(d).
"Deficit Capital Account" means with respect to any Unit Holder, the deficit
balance, if any, in such Unit Holder's Capital Account as of the end of the taxable year, after
giving effect to the following adjustments:
credit to such Capital Account any amount that such Unit Holder is
obligated to restore to the Company under Regulation Section 1.704-1 (b)(2)(ii)(c), as
well as any addition thereto pursuant to the next to last sentences of Regulation Sections
1.704-2(g)(l) and (i)(5); and
(i)
debit to such Capital Account the items described in Regulation Sections
1.704-1 (b)(2)(ii)(d)(4), (5) and (6).
(ii)
This definition is intended to comply with the provisions of Regulation Sections 1.704-
l(b)(2)(ii)(d) and 1.704-2, and will be interpreted consistently with those provisions.
"Member Minimum Gain" has the same meaning as the term "partner nonrecourse
debt minimum gain" in Regulation Section 1.704-2(i).
"Member Nonrecourse Deductions" has the same meaning as the term "partner
nonrecourse deductions" in Regulation Sections 1.704-2(i)(l) and (2). The amount of Member
Nonrecourse Deductions for a Company fiscal year shall be determined in accordance with
Regulation Section 1.704-2(i)(2).
"Nonrecourse Deductions" has the meaning set forth in Regulation Section 1.704-
2(b)(1). The amount of Nonrecourse Deductions for a Company fiscal year shall be determined
pursuant to Regulation Section 1.704-2(c).
'Nonrecourse Liability", has the meaning set forth in Regulation Section 1.704-
2(b)(3).
2. Special Allocations. The following special allocations shall be made for any fiscal
year of the Company in the following order:
2.1 Minimum Gain Chargeback. If there is a net decrease in Company Minimum
26LLC AGREEMENT
Gain during any Company fiscal year, each Unit Holder shall be specially allocated items of
Company income and gain for such year (and, if necessary, subsequent years) in an amount
equal to such Unit Holder's share of the net decrease in Company Minimum Gain, determined in
accordance with Regulation Sections 1.704-2(f) and 1.704-2(g)(2). The items to be so allocated,
and the manner in which those items are to be allocated among the Unit Holders, shall be
determined in accordance with Regulation Sections 1.704-2(f) and 1.704-2(j)(2). This section 2.1
is intended to satisfy the minimum gain chargeback requirement in Regulation Section 1.704-2(f)
and shall be interpreted and applied accordingly.
2.2 Member Minimum Gain Chargeback. If there is a net decrease in Member
Minimum Gain during any Company fiscal year, each Unit Holder who has a share of that
Member Minimum Gain, determined in accordance with Regulation Section 1.704-2(i)(5), shall
be specially allocated items of Company income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Unit Holder's share of the net decrease in Member
Minimum Gain, determined in accordance with Regulation Sections 1.704-2(i)(4) and 1.704-
2(i)(5). The items to be so allocated, and the manner in which those items are to be allocated
among the Unit Holders, shall be determined in accordance with Regulation Sections 1.704-
2(h)(4) and 1.704-2(j)(2). This section 2.2 is intended to satisfy the minimum gain chargeback
requirement in Regulation Section 1.704-2(i)(4) and shall be interpreted and applied accordingly.
2.3 Qualified Income Offset. In the event that any Unit Holder unexpectedly
receives any adjustments, allocations, or distributions described in Regulation Sections 1.704-
1(b)(2) (ii)d)(4), (5) or (6), items of Company income and gain shall be specially allocated to
such Unit Holder in an amount and in a manner sufficient to eliminate as quickly as possible, to
the extent required by Regulation Section 1.704-(l)(b)(2)(ii)(d), the Deficit Capital Account of
the Unit Holder (which Deficit Capital Account shall be determined as if all other allocations
provided for in Article 7 of the Agreement have been tentatively made as if this section 2.3 were
not in this Agreement).
2.4 Nonrecourse Deductions. Nonrecourse Deductions shall be allocated among
the Unit Holders in accordance with their respective Percentage Interests.
2.5 Member Nonrecourse Deductions. Any Member Nonrecourse Deductions
shall be specially allocated among the Unit Holders in accordance with Regulation Section
1.704-2(i).
3. Corrective Allocations.
3.1 Allocations to Achieve Economic Agreement. The allocations set forth in the
last sentence of section 7.2 of the Agreement and in section 2 hereof are intended to comply with
certain regulatory requirements under Code Section 704(b). The Members intend that, to the
extent possible, all allocations made pursuant to such Sections will, over the term of the
Company, be offset either with other allocations pursuant to section 2 or with special allocations
of other items of Company income, gain, loss, or deduction pursuant to this section 3.1.
Accordingly, the Manager is hereby authorized and directed to make offsetting allocations of
Company income, gain, loss or deduction under this section 3.1 in whatever manner the Manager
LLC AGREEMENT 27
i
determines is appropriate so that, after such offsetting special allocations are made, the Capital
Accounts of the Unit Holders are, to the extent possible, equal to the Capital Accounts each
would have if the provisions of section 2 hereof were not contained in this Agreement and all
income, gain, loss and deduction of the Company were instead allocated pursuant to section 7.1
of the Agreement.
3.2 Waiver of Application of Minimum Gain Chargeback. The Manager, with
the prior consent of Members owning a majority of the Units owned by Members,, shall request
from the Commissioner of the Internal Revenue Service a waiver, pursuant to Regulation Section
1.704-2(f)(4), of the minimum gain chargeback requirements of Regulation Section 1.704-2(f) if
the application of such minimum gain chargeback requirement would cause a permanent
distortion of the economic arrangement of the Partners, as reflected in Section 7.1 of the
Agreement.
4 Other Allocation Rules.
4.1 General. Except as otherwise provided in this Agreement, all items of
Company income, gain, loss, deduction, and any other allocations not otherwise provided for
shall be divided among the Unit Holders in the same proportions as they share Net Profits or Net
Losses, as the case may be, for the year.
4.2 Allocation of Recapture Items. In making any allocation among the Unit
Holders of income or gain from the sale or other disposition of a Company asset, the ordinary
income portion, if any, of such income and gain resulting from the recapture of cost recovery or
other deductions shall be allocated among those Unit Holders who were previously allocated (or
whose predecessors-in-interest were previously allocated) the cost recovery deductions or other
deductions resulting in the recapture items, in proportion to the amount of such cost recovery
deductions or other deductions previously allocated to them.
4.3 Allocations in Connection with Varying Interests. If, during a Company
fiscal year, there is (i) a permitted transfer of a Membership Interest or Economic Interest under
this Agreement during a Company fiscal year or (ii) the admission of a Member or additional
Members, Net Profit, Net Loss, each item thereof, and all other tax items of the Company for
such period shall be divided and allocated among the Unit Holders by taking into account their
varying interests during such fiscal year in accordance with Code Section 706(d) and using any
conventions permitted by law and selected by the Manager.
4.4 Allocation of Excess Nonrecourse Liabilities. Solely for purposes of
determining a Unit Holder's proportionate share of the "excess nonrecourse liabilities" of the
Company within the meaning of Regulation Section 1.752-3(a)(3), the Unit Holders' interests in
the Company's profits shall be allocated according to the requirements of Regulation 1.752-3, as
determined by the Manager after consultation with the Members.
5. Determination of Net Profit or Loss.
5.1 Computation of Net Profit or Loss. The Net Profit or Net Loss of the
28LLC AGREEMENT
Company, for each fiscal year or other period, shall be an amount equal to the Company's
taxable income or loss for such period, determined in accordance with Code Section 703(a) (and,
for this purpose, all items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(1), including income and gain exempt from federal income tax,
shall be included in taxable income or loss).
5.2 Adjustments to Net Profit or Loss. For purposes of computing taxable
income or loss on the disposition of an item of Company property or for purposes of determining
the cost recovery, depreciation, or amortization deduction with respect to any property, the
Company shall use such property's book value determined in accordance with Regulation
Section 1.704-1(b). Consequently, each property’s book value shall be equal to its adjusted basis
for federal income tax purposes, except as follows:
j
The initial book value of any property contributed by a Member to
the Company shall be the gross fair market value of such property at the time of
contribution;
(a)
In the discretion of the Members holding not less than two-thirds
of the Units held by Members, the book value of all Company properties may be adjusted
to equal their respective gross fair market values, as determined by the Members as of the
following times: (1) in connection with the acquisition of an interest in the Company by a
new or existing Member for more than a de minimis capital contribution, (2) in
connection with the liquidation of the Company as defined in Regulation Section 1.704-
(l)(b)(2)(ii)(g), or (3) in connection with a more than de minimis distribution to a retiring
or a continuing Unit Holder as consideration for all or a portion of his or its interest in the
Company. In the event of a revaluation of any Company assets hereunder, the Capital
Accounts of the Unit Holders shall be adjusted, including continuing adjustments for
depreciation, to the extent provided in Regulation Section 1.704-(l)(b)(2)(iv)(f);
(b)
If the book value of an item of Company property has been
determined pursuant to this Section 5.2, such book value shall thereafter be used, and
shall thereafter be adjusted by depreciation or amortization, if any, taken into account
with respect to such property, for purposes of computing taxable income or loss.
(c)
5.3 Items Specially Allocated. Notwithstanding any other provision of this
section 5, any items that are specially allocated pursuant to sections 2 or 3 shall not be taken into
account in computing Net Profit or Net Loss.
6. Mandatory Tax Allocations Under Code Section 704(c). In accordance with Code
Section 704(c) and Regulation Section 1.704-3, income, gain, loss and deduction with respect to
any property contributed to the capital of the Company shall, solely for tax purposes, be
allocated among the Unit Holders so as to take account of any variation between the adjusted
basis of such property to the Company for federal income tax purposes and its initial book value
computed in accordance with Paragraph (a) of section 5.2 of this Appendix. Prior to the
contribution of any property to the Company that has a fair market value that differs from its
adjusted tax basis in the hands of the contributing Member on the date of contribution, the
29LLC AGREEMENT
contributing Member and the Manager (or, if the contributing Member is the Manager, an
affirmative vote of the majority of the Units owned by non-contributing Members) shall agree
upon the allocation method to be applied with respect to that property under Regulation Section
1.704-3, which allocation method shall be set forth in writing and signed by said persons.
If the book value of any Company property is adjusted pursuant to Paragraph (b) of
section 5.2 of this Appendix, subsequent allocations of income, gain, loss and deduction with
respect to such property shall take account of any variation between the adjusted basis of such
property for federal income tax purposes and its book value in the same maimer as under Code
Section 704(c). The choice of allocation methods under Regulation Section 1.704-3 with respect
to such revalued property shall be made by the Manager.
Allocations pursuant to this section 6 are solely for purposes of federal, state, and local
taxes and shall not affect, or in any way be taken into account in computing, any Unit Holder's
Capital Account or share of Net Profit, Net Loss, or other items as computed for book purposes,
or distributions pursuant to any provision of this Agreement.
30LLC AGREEMENT
EXHIBIT 12.4 (d)
PLEDGE AGREEMENT
This Pledge Agreement (the “Agreement”) is made this
, by and among _______
reference to the following facts:
day of
the “Seller”), with(the “Buyer”), and20
Pursuant to the terms of the Limited Liability Company Agreement of OB Renton
Properties, LLC (the “Company” or the “Corporation”) dated November 11, 2011 (the
“Agreement”), Buyer has purchased all Units owned by Seller. The Units are being
redeemed/purchased and shall be “Collateral”.
A.
The parties hereby desire to provide for the terms and conditions of an agreement
whereby Buyer agrees to pledge the Collateral as security for the installment obligation
pertaining to the purchase.
B.
All undefined capitalized terms herein shall have the meaning set forth in theC.
Agreement.
IT IS AGREED AS FOLLOWS:
Pledge. Buyer hereby pledges the Collateral to Seller as security for the
Installment obligation, and any and all other indebtedness now or hereafter
owing by Buyer to the Seller, and hereby grants a security interest in the
Collateral to Seller. Simultaneously with the execution of this Agreement,
Buyer shall deliver to the Corporation’s legal counsel, the certificate
representing the Collateral and such assignments as Seller shall require,
and the Corporation’s legal counsel shall hold the same in escrow for use
in the event of a default by Buyer
1.
Representations and Warranties. Buyer represents and warrants, with
respect to the Collateral, that:
2.
Buyer have good and marketable title to all of the Collateral, free
and clear of all liens and encumbrances of every nature, except
the lien of this Agreement, and there are no outstanding options,
warrants or commitments of any nature relating to the Collateral.
(a)
The execution, delivery and performance of this Agreement is
within the Buyer’ power, has been duly authorized and is not in
conflict with applicable law or the terms of any any indenture,
agreement or undertaking to which the Buyer is a party or by
which the Buyer is bound or affected;
(b)
31LLC AGREEMENT
:'J i-;:r:-::-yyyyyyy.§,->:vvv-»:-v.c-i->v,v.1-ev«"v-.'/,",-.^v
(c)There are no actions or proceedings pending by or against Buyer
or the Company before any court or administrative agency and
Buyer has no knowledge of any pending, threatened, or imminent
litigation, governmental investigations or claims, complaints,
actions or prosecutions involving Buyer or Company, except as
heretofore specifically disclosed in writing to Seller.
Buyer covenants and agrees with respect to the Collateral3.Covenants,
during the term of this pledge:
Buyer will not transfer, assign, alienate, or sell the Collateral, or
take any action which will impair, damage or destroy Secured
Party’s rights with respect to the Collateral or the value thereof;
(a)
Buyer will keep the Collateral free from unpaid charges,
including taxes, and from all liens and encumbrances, except for
the lien of this pledge, and will warrant and defend the Collateral
against the claim sand demands of all other persons;
(b)
Buyer agrees to execute UCC-1 financing statements and to take
whatever other action is reasonably requested by Seller to perfect
and continue Seller’s security interest in the Collateral in first
priority. Buyer appoints Seller as Buyer’ attorney-in-fact for the
purpose of executing any documents necessary to perfect or
continue the security interest grated herein.
(c)
Buyer will furnish Seller such powers, resolutions and other
instruments as may be reasonably required by Seller to assure
transferability of the Collateral when and as often as requested
by Seller, in the event of a default.
(d)
Voting Privileges; Distributions. During the term of this Pledge, Buyer
shall have the right to vote the Collateral on all matters, if and so long as
Buyer is not in default hereunder. In the event of default by Buyer, Seller
shall be entitled to vote the Collateral.
4.
Return of Collateral. Upon payment in full of the installment obligation
and the performance of all obligations secured hereby, the Collateral shall
be returned to Buyer, and this Agreement shall thereupon be fully
performed and discharged.
5.
Default. The occurrence of any of the following events shall constitute a
default hereunder:
6.
32LLC AGREEMENT
\Failure to pay the installment obligation according to its terms, or
a failure to pay any other installment obligation or obligation
owed by the Buyer to the Seller, within ten days of the due date
and after five days written demand by Seller..
(a)
Nonperformance of any term or condition of this Pledge
Agreement for more than 10 days after written notice of such
default.
(b)
The Company or Buyer become subject to any proceeding under
the laws relating to insolvency or bankruptcy, whether state or
federal, and whether voluntarily or involuntarily instituted or
brought, including, but not limited to, those seeking
reorganization, deferment or rearrangement of its debts.
(c)
Remedies. In the event of default, and in addition to any and all rights
available to the Seller under applicable law, the Seller may avail
himself/itself at any time of any of the following, in such order and from
time to time, as the Seller deems expedient:
7.
Vote all of the Collateral on any and all matters of business, and
to this extent this Agreement shall constitute a proxy coupled
with an interest in such Collateral.
(a)
Sell all or any part of the Collateral at private sale after at least
30 days written notice to Buyer. Such notice shall state the time
and place and any and all conditions of sale. The sale shall be
for cash at auction and the Buyer, the Seller and any other party
may bid at such sale, and the Seller may bid the installment
obligation without paying cash thereof. The proceeds of the sale
shall be applied first to pay the reasonable cost of sale and all of
the escrow agent’s and Seller’s other reasonable costs, second to
payment of the debt secured hereby, and any additional sum shall
be paid to Buyer as his/its interest may appear. The party
conducting the auction may sell all or part of such of the
Collateral as he deems expedient. There shall be no redemption
from any such sale and the Buyer hereby warrants that the
purchaser will receive from such sale clear title to the Collateral,
free of any lien. It is hereby agreed that steps to sell the
Collateral in substantial compliance herewith are commercially
reasonable and are hereby approved.
(b)
Exercise any and all other rights available to the Seller under the
Washington Uniform Commercial Code, including judicial
foreclosure and strict foreclosure.
(c)
33LLC AGREEMENT
Nothing in this Agreement shall preclude Seller from collection
on the installment obligation without resorting to the Collateral.
(d)
Waiver. Buyer waives any right to require Seller to proceed against any
person, to proceed or exhaust any other collateral, or to pursue any other
remedy available to Seller. The Buyer further waives any defense arising
by reason of any disability or other defense of any other person.
8.
Miscellaneous.9.
Any notices required hereimder shall be effective only if given in
writing (i) by personal delivery, or (ii) by registered U.S. mail
postage prepaid, return receipt requested, to the party’s address
stated below. The address of any party may be changed by such
party, if advanced written notice thereof is given to all other
parties. Each notice will be deemed given to a party when
delivered in person, or two business days after mailing if sent
registered mail to the address of such party as set forth below.
(a)
This Agreement shall be binding upon and inure to the benefit of
the parties, their successors and assigns; provided, the rights of
the parties hereunder shall not be assigned without the prior
written consent of the other,
exhibits/appendices hereto constitute the entire understanding
and agreement between the parties hereto and supersede all prior
agreements and understandings, either oral or written, with
respect to the subject matter thereof. Any modification of this
Agreement must be in writing and signed by all parties hereto.
In any suit, action or appeal therefrom to rescind, enforce or
interpret this Agreement or any term of provision hereof, the
prevailing party shall be entitled to recover its costs incurred in
connection with such suit, action or appeal, including reasonable
attorney fees. This Agreement shall be construed in accordance
with the laws of the state of Washington.
(b)
This Agreement and the
IN WITNESS WHEREOF, the parties have signed this Agreement the date first written
above.
34LLC AGREEMENT